After Worst Budget Crisis in History, California Has $2.4 Billion Surplus
For the past decade, California has been dealing with one of the worst budget crises in the history of the United States. This year, the Golden State is closing out the fiscal year with a $2.4 billion surplus. According to the California Legislative Analyst’s office, the improving economy and the passage of Proposition 30, a temporary tax hike, has not only helped California recover but the state is expected to see budget surpluses even when the temporary taxes expire.
In 2009-2010, California had hit its lowest point. The state had a $60 billion deficit and had to send out IOUs to state vendors. Countless cuts had to be made each year to try to make the budget work. Now, California is expected to see a $5.6 billion surplus in 2015 and $10 billion by 2018.
The biggest help has come from the passage of Proposition 30. Prop 30 was a ballot measure passed by voters in 2012 that temporarily increased income taxes for those making over $250,000 until the end of 2018. Prop 30 also temporarily increased the state’s sales tax by a quarter of a percent until 2016. The passage of Prop 30 has not only allowed the state to avoid a $6 billion cut to education but allocate an additional $3.1 billion to fund schools.
This incredible and fast recovery can certainly be used as a road map for future state and national recoveries. Under Republican Governor Arnold Schwarznegger, the government racked up copious sums of debt even before the 2008 recession. Since Democrat Jerry Brown was elected governor in 2010, the state has taken a very different approach to the budget problem, one that has clearly worked.
While Republicans in California decried the passage of Prop 30 as “economy killing” and “business killing”, the increase in taxes, even if temporary, on the richest residents and a slight increase in the sales tax has completely turned the economy around and now businesses and regular people can prosper all the same.
(Image courtesy of Neon Tommy)